Berenberg sees no end to luxury bear market as China woes persist

Hermes International SCA

Tue 07:02

** Berenberg sees a poor Q4 setup for luxury names after the sector outperformed the wider European market recently during a tech selloff
** "Absent a clear reversal of the Chinese, aspirational or Gen Z headwinds, we see no end to the bear market. Downgrade risks persist and valuations may overshoot" — Berenberg
** Sees Chinese demand as a structural, not cyclical, problem
** Says a weak Q3 is persisting into Q4, citing a poor Chinese Golden Week, US midterms disruption and Q4 equity selloffs
** Also flags risks to European tourism from global coverage of riots in France and elsewhere, adding to structural headwinds
** Says luxury is a geared AI play, not a defensive trade, as much of the sector's remaining growth comes from markets buoyed by AI-driven wealth
** Sees some opportunities in absolute and affordable luxury, avoids the aspirational middle 
** Says restoring the sector's investment appeal will require higher shareholder returns and lower capital spending



 (Reporting by Anna Pruchnicka)
 ((anna.pruchnicka@tr.com))